Dairymen watch cottonseed supply

Lower expected U.S. cotton acreage for the coming year may not necessarily result in less cottonseed for dairy feeding.

That’s because the potential for abandonment is less this year, which could translate to higher overall production of cotton and cottonseed, according to Cotton Incorporated.

According to USDA’s March 31 Prospective Plantings report, cotton acreage is projected to shrink to 8.8 million acres in 2009, a 7 percent decrease from last year and the lowest level since 1983.

“While 7 percent is significant, it is important to note that cotton acreage has dropped by double digit percentages for the two previous years,” says Tom Wedegaertner, director, cottonseed research and marketing, Cotton Incorporated.

“This lower rate of decline may be a sign we’ve hit the bottom from an acreage standpoint. Additionally, with favorable growing conditions and a return to historical average abandonment rates, it is possible that the 2009 cottonseed supply could meet or exceed last year’s supply.”

Abandoned acres for cotton reached around 16 percent in 2008, compared to only 3 percent for 2007. In addition to expected less abandonment in 2009, USDA’s March 31 report increased anticipated cotton acreage by more than 700,000 acres since earlier industry projections. “The added acreage was a nice surprise, especially for the dairy producers who rely on this important feedstuff,” says Wedegaertner.

Several market and weather factors contributed to the aforementioned increase, according to Wedegaertner, including lower corn and peanut prices, along with normal crop rotation practices. In addition, early drought in Texas and excess moisture in the Mid-South during prime planting season influenced crop planting decisions for the benefit of cotton.

If abandonment rates return to average levels, actual cotton production is projected at 12.8 million bales of cotton, which would produce about 4.5 million tons of cottonseed. After the crush, about 2.2 million tons of cottonseed will be available for feeding, about the same as last year.

With lower abandonment rates, and this year’s unique market conditions, dairy producers should not only see adequate cottonseed supply, but also moderate prices, Wedegaertner says.

“Unlike in previous years, forward contracting on feed isn’t happening quite as much, as producers’ cash flows are being pinched,” says Rose. “Many of our customers are buying week to week.”

Normally, producers who don’t pre-book can find themselves facing steep price increases when supply shrinks. “This year, those dairies that didn’t pre-book are no doubt relieved to see feed prices continue to trend downward,” says Rose. “With last year’s record high prices, dairy producers will probably look at cottonseed as a reasonable value this year.”

The available supply of cottonseed started to drop dramatically in 2008, after a 21-million bale U.S. cotton crop in 2006 and an 18-million bale crop in 2007. As cottonseed supplies fell sharply, cottonseed prices rose from $155 per ton to over $300 per ton. At the same time, prices were rising in other feed crops such as corn and soybeans.

Cottonseed prices have since moderated, but “still (cottonseed) maintains a fairly strong price,” according to Wedegaertner. “It’s not unusual to hear prices in the Mid-South of $200-plus per ton, which is a lot more than it’s been historically.”

When cottonseed prices rise, there are usually two approaches dairymen or livestock feeders take, according to Wedegaertner. “One approach is to still feed cottonseed at fairly high levels to your high-producing cows and drop it out of the ration for the low producers. You have to be big enough to have your dairy divided into high producers, medium producers and low producers.

“Some dairies aren’t set up that way. They may drop back in the amount they feed. Instead of feeding 5 pounds per head per day, they may feed 2 pounds per head per day. You can still get a benefit from feeding 2 pounds per day.”

Even at high prices, a significant number of dairymen are loyal to the product, according to Wedegaertner. “Cottonseed generally does give a little boost in production and in butterfat. Some dairymen are not going to drop it out of the ration no matter what the cost.”

But dairymen have become more aware of the supply and demand fundamentals that impact the price of cottonseed, according to Wedegaertner. “It’s tough when someone gets on the wrong side of the market and misses it by $100 a ton. We try to explain why that happens to the dairymen, so they know it’s a supply and demand situation.”

With over 8.5 million dairy cows in the United States, eventual demand for cottonseed could conceivably reach close to 6 million tons, according to Wedegaertner. “This year and last year, we only had about 2 million tons of cottonseed. So there is plenty of room for more cottonseed to go into that market.”

Research has also shown that cottonseed can be temporarily stored in grain bags farmers often use when there is a shortage of bin storage for grain. “They could buy the cottonseed at harvest and store it in the bags to stretch their supply.”

The United States imports little cottonseed, although imports reached almost 300,000 tons one year in the late 1990s. “Most of the cottonseed we import comes from Australia and goes to feeding in California,” Wedegaertner said. “The Australian cotton market has fallen on hard times and is not much of a factor anymore. We’re exporting more than we’re importing — to the Pacific Rim countries.”

Cottonseed is an excellent source of fiber, protein and energy. Typical rations can include up to 15 percent cottonseed on a dry matter basis. For more information, including reports on market conditions, feeding information and a list of suppliers, visit www.cottoninc.com[3].